Leopalace21 (TSE:8848) Has Affirmed Its Dividend Of ¥5.00

Leopalace21 Corporation (TSE:8848) has announced that it will pay a dividend of ¥5.00 per share on the 30th of June. Including this payment, the dividend yield on the stock will be 1.7%, which is a modest boost for shareholders' returns.

See our latest analysis for Leopalace21

Leopalace21's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Leopalace21's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 9.3% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 7.5%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Leopalace21's Dividend Has Lacked Consistency

Looking back, Leopalace21's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The most recent annual payment of ¥10.00 is about the same as the annual payment 9 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Leopalace21 has impressed us by growing EPS at 76% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Leopalace21 Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Leopalace21 that investors need to be conscious of moving forward. Is Leopalace21 not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.